Have you ever considered why most people fail as traders? We know that most do. In fact, industry folklore tells us that about 90% of daytraders will lose money and quit trading. In this article, we are going to break down why traders fail, and then we are going to discuss a practical solution to prevent this cause of failure from materializing in ones trading.
So, why do most people fail and quit trading? The first and most obvious answer is because they lose money. But is this really the reason that people quit? If it were simply a matter of money, a person could cut back his expenses, save more money, and come back to the game with a new grubstake. The fact that people lose and quit trading has to do with more than just money.
The loss of money stings so bad, that eventually it crosses a psychological line and the person does not believe they can trade successfully and gives up. Of course, there are other reasons that people quit, but this is probably one of the leading causes—people cross a line psychologically where they cannot handle the stress of losing money and facing defeat on a regular basis.
Now, the reality is that most traders fail early on in their careers. It’s much rarer for a seasoned professional to reach the breaking point and quit after 20 years in the business. Typically, the most challenging and difficult years are the early ones. The first 2-5 years is where most people will quit trading. If this is true, then a new trader should focus on simply surviving the learning curve!
The learning curve is where a trader is learning about the market, and learning about himself, and this is where most traders fail and give up. Therefore, we are going to provide a tool to help traders survive the learning curve. The secret is to simply reduce risk substantially. This will empower a new trader like few other things.
Most new traders conduct a few forex broker reviews and open an account, start trading, and are risking way too much of their account equity on a single trade and this makes trading very difficult. Instead, new and developing traders should consider risking no more than 0.25% or less of their account on each trade. This will substantially reduce the stress connected with any single transaction as a loss will be so small it will not sting nearly as bad as a normal loss. This will also help a trader take his focus off the money that is being lost or made and onto actual trade execution.
By substantially reducing risk, a trader will be better positioned to trade from a mentally detached perspective from money, and this is an essential key to staying in the game long enough to develop as a trader. It is always good never to use money gained from other income means when trading. Like small business loans and other finances you may be involved with.
Risk disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
So, why do most people fail and quit trading? The first and most obvious answer is because they lose money. But is this really the reason that people quit? If it were simply a matter of money, a person could cut back his expenses, save more money, and come back to the game with a new grubstake. The fact that people lose and quit trading has to do with more than just money.
The loss of money stings so bad, that eventually it crosses a psychological line and the person does not believe they can trade successfully and gives up. Of course, there are other reasons that people quit, but this is probably one of the leading causes—people cross a line psychologically where they cannot handle the stress of losing money and facing defeat on a regular basis.
Now, the reality is that most traders fail early on in their careers. It’s much rarer for a seasoned professional to reach the breaking point and quit after 20 years in the business. Typically, the most challenging and difficult years are the early ones. The first 2-5 years is where most people will quit trading. If this is true, then a new trader should focus on simply surviving the learning curve!
The learning curve is where a trader is learning about the market, and learning about himself, and this is where most traders fail and give up. Therefore, we are going to provide a tool to help traders survive the learning curve. The secret is to simply reduce risk substantially. This will empower a new trader like few other things.
Most new traders conduct a few forex broker reviews and open an account, start trading, and are risking way too much of their account equity on a single trade and this makes trading very difficult. Instead, new and developing traders should consider risking no more than 0.25% or less of their account on each trade. This will substantially reduce the stress connected with any single transaction as a loss will be so small it will not sting nearly as bad as a normal loss. This will also help a trader take his focus off the money that is being lost or made and onto actual trade execution.
By substantially reducing risk, a trader will be better positioned to trade from a mentally detached perspective from money, and this is an essential key to staying in the game long enough to develop as a trader. It is always good never to use money gained from other income means when trading. Like small business loans and other finances you may be involved with.
Risk disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
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